Fintech|Python Gold Analysis D14 European and American Options Valuation |||Title Word Limit I want to express the importance of this section
This section is a knowledge point that even children studying financial engineering and options futures cannot escape, but my teacher said that maturing rights valuation is all over the place. Much of the content was understood by going to Google [laughing R]
This section includes:
⚠️ Monte Carlo simulated valuation of European options
⚠️ American option least squares Monte Carlo valuation
The least squares Monte comes from Longstaff & Schwarz's paper. The difficult point of American option pricing is the exercise problem at each point in time, and it is necessary to compare the current strike value (e_T) with the current strike value (e_T) and margin value (H_t).
To estimate the CV, the LS duo proposed a least squares regression. First, follow the normal Monte Carlo simulation of several target asset price paths, calculate payoff at the end of the period, and then backtrack backwards from the beginning of the period, calculate the predicted value of the previous time point, compare it with that node's strike value, take the larger value as the node option price, and continuously backtrack and compare until the initial node.
Understanding the LSM algorithm is still difficult. Big friends and children who don't understand can send me private messages in the background. I'll share with you a few articles that will help you understand this point~ [Party R] [Party R]
This section includes:
⚠️ Monte Carlo simulated valuation of European options
⚠️ American option least squares Monte Carlo valuation
The least squares Monte comes from Longstaff & Schwarz's paper. The difficult point of American option pricing is the exercise problem at each point in time, and it is necessary to compare the current strike value (e_T) with the current strike value (e_T) and margin value (H_t).
To estimate the CV, the LS duo proposed a least squares regression. First, follow the normal Monte Carlo simulation of several target asset price paths, calculate payoff at the end of the period, and then backtrack backwards from the beginning of the period, calculate the predicted value of the previous time point, compare it with that node's strike value, take the larger value as the node option price, and continuously backtrack and compare until the initial node.
Understanding the LSM algorithm is still difficult. Big friends and children who don't understand can send me private messages in the background. I'll share with you a few articles that will help you understand this point~ [Party R] [Party R]
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